The capital market line (CML) represents portfolios that optimally combine risk and return.
CML is a special case of the capital allocation line (CAL), where the risk portfolio is the market portfolio. Thus, the slope of the CML is the Sharpe ratio of the market portfolio.
The intersection point of the CML and the efficient frontier will result in the most efficient portfolio, called the tangent portfolio.
As a generalization, buy assets if the Sharpe ratio is above the CML and sell if the Sharpe ratio is below the CML.
Performance Based Management (ABM) is a means of analyzing a company’s profitability by looking at every aspect of its business to determine its strengths and weaknesses.
A ballpark figure is a rough estimate of what something might mean in numerical terms when a more precise number is estimated, such as the cost of a product.
The binomial distribution is a probability distribution that generalizes the probability that a value will take on one of two independent values given a set of parameters or assumptions.
Share capital is the number of ordinary and preferred shares that the company has the right to issue and which are accounted for on the balance sheet as part of share capital.
The Central Limit Theorem (CLT) states that the distribution of sample means approaches a normal distribution as the sample size increases, regardless of the distribution of the population.